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So, What are Jumbo Loans?


What are Jumbo Loans?

The typical American consumer has this drive to own his or her own home. One\'s home is his or her "castle", a place to be proud of, a place to raise a family and grow old in. Unfortunately, the vast majority of Americans cannot simply pay cash and buy a home like one would buy a new suit or dress. As a result, many Americans "buy" real property, particularly their homes by obtaining a loan secured by the property they acquire at a particular interest rate for a set period of time, usually for thirty (30) years. Such a secured loan for one\'s home is commonly called a "mortgage" or a loan secured by a deed of trust.

Loans in this country for residential as opposed to commercial properties are categorized as a "conforming" or "non-conforming" loan.

"Jumbo loans" in the United States are mortgage or trust deed loans that typically have a high credit standard and restrictions and is in an amount above existing conforming loan limitations in place and is also called a "non-conforming loan". In this country a "jumbo loan" is set on a state by state basis and within each county in each state the dollar threshold for such a loan may vary. For example, in states such as California, New York and Hawaii where land on the average is much higher priced than for example a state in the mid-west, the dollar amount to take a loan out of a confirming loan to a non-conforming loan will typically be a higher amount.

Standards for Jumbo Loans.

Fannie Mae (FNMA) and Freddie Mac(FHLMC)which are two United States government regulated and sponsored entities establish the threshold on the maximum value of any residential as opposed to a commercial loan secured by a mortgage or trust deed on real property that they will purchase from an institutional lender such as a private bank or savings and loan.

FNMA and FHLMC buy the vast majority of all American mortgages and trust deeds from institutional lenders on the secondary market which allows these private banks and other lenders greater liquidity to lend on future mortgages and trust deeds.

When the maximum limits for FNMA and FHLC fail to cover the full loan amount desired by a particular consumer, the loan is deemed a "jumbo mortgage" or "jumbo loan"

The resulting effect is that when a loan exceeds what FNMA and FHLMC will loan on a residential property, the points and interest rates for such a loan will be higher for the particular consumer than a conforming loan that is less than the maximum threshold for a jumbo loan.

Obtaining a Jumbo Loan

Despite the risks of jumbo loans when the FNMA and FHLMC will not buy a given residential loan on the secondary market which frees up an institutional lender\'s liquidity, many lenders do provide such a loan. However, the criteria for the borrower to get such a loan is looked at in greater detail since the loan is larger by the definition of such a loan. Apart from a higher rate of interest for such a loan, the lender will require a larger down payment for the residential property, usually between twenty percent (20%) and thirty percent (30%)of the property\'s purchase price. The borrower just show several years of income to support the monthly payments and have a high FICO score usually above six hundred seventy-five (675).



  



Joe Canestraro NMLS # 219951,OH #LO.001509.000; FL #LO24523, Branch Phone 330 865 9600 Ph. Ext. 1
Home Loans and Refinancing for the States of Ohio and Florida.
The Money Connection, a DBA of Polaris Home Funding Corp. NMLS #38072, Phone (616) 667-9000.
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